What stands in way of Ukraine-EU deal?

Russia and Ukraine strike $15bln deal

New Pipeline To Europe Ends Ukraine’s Blackmail And Thievery Of Russian Gas

Ken Silverstein

Contributor

The Russian and Ukrainian conflict is about freedom — not just to political expression but also to explore new economic ties with the western world, which includes finding additional access to lucrative natural gas supplies.

It’s a battle that extends well beyond the walls of the former Soviet Bloc and into the heart of Europe that has long relied on Russian natural gas to provide about a quarter of its needs and which a third of it flows through Ukraine’s pipelines. Now that Russia has taken military control of the Crimean section of Ukraine, those conduits are in peril.

Russia, meantime, provides anywhere from one-third to one-half of Ukraine’s natural gas. And, since 2006, the two nations have had legitimate battles over how to value that vital product. During the early years of that dispute, Russia had wanted to quadruple prices to Ukraine. Recently, though, those natural gas prices are tied to global oil prices and have sold at much greater rates, which has cut Ukraine’s consumption of Russian natural gas.

Ukraine still subsidizes the gas that it does buy for its own citizens, noting that without such help, its already recession-ridden country would go into an economic tailspin. The International Monetary Fund is reporting that energy subsidies made up 7.5 percent of Ukraine’s 2012 gross domestic product.

“The Ukrainian economy has been in recession since mid-2012, and the outlook remains challenging. In January–September 2013 GDP contracted by 1.25 percent year-over-year, reflecting lower demand for Ukrainian exports and falling investments,” says the IMF’s December 2013 analysis.

For the moment, Ukraine — and Europe as well — have gotten a minor reprieve because each has had a mild winter. Europe is also warming to U.S. natural gas imports in the form of liquefied natural gas, which can sell for a premium there. Its also been shying away, lately, from Russian gas and using more coal.

Europe, too, has also won access to a number of new pipeline routes, or ones that are able to bypass Ukraine and enter the continent other ways. Among them: Pipelines are linking the Caspian Sea, Middle East and North Africa with Continental Europe. Algeria, for example, is increasing the capacity of its export routes that carry gas into Italy and efforts are also underway to do the same for routes into France and Germany.

Ukraine could ultimately break loose of the natural gas shackles from which Russia has help it captive. A Washington Post story says that Ukraine has signed deals with Chevron Corp and Royal Dutch Shell to invest as much as $10 billion into shale gas development in the western part of the country. ExxonMobil, meantime, wants to drill for oil and gas in the deep water of the Black Sea there — something that the paper says will have to wait given the uncertainties.

It’s accurate to say that the distrust that permeated during Cold War era still exists. But Russia can still be counted on — to act in its self interest. And in this case, the need to grow its own economy and to continue to market its natural gas to both Eastern and Western Europe could help soothe things.

Many Europeans say that Russia needs the revenues from selling its natural gas as much as the West needs those supplies. They maintain that the former Communist state is as reliable of a partner as the nations of the Middle East or Northern Africa. Other nations made up of mostly the former Soviet Bloc argue that Russia leverages its natural gas domination as a way to earn economic clout.

There’s no disagreement that Russia holds vast natural gas reserves. According to theU.S. Energy Information Administration, it possesses 27.5 percent of the world’s gas supply. About half of its own needs are met with natural gas while it provides about 23 percent of Europe’s demand.

Russia’s prized national asset is the natural gas company Gazprom, which is an outgrowth of the old Soviet empire. Today, though, Gazprom suffers from aging fields, state regulation and monopolistic control.

While Russia has been investing in its natural gas sector, it lacks the know-how or the capital to vastly increase its production. For that, it has been in talks with some western enterprises that consist of ConocoPhilips and Norsk Hydro of Norway to develop the gas-rich Shtokman fields in the Barents Sea. To become an energy leader, the U.S. Energy Information Administration says that between $173 billion and $203 billion must be invested in Russia’s gas sector by 2020.

Therein is the western world’s leverage with Russia, which needs the capital and technology to increase its international status. The crisis in Ukraine, however, is challenging the whole geo-political-economic paradigm. Russia needs Ukraine both culturally and economically. But it also needs to refurbish its image and to ingratiate itself with the world community.

Russia Moves to Deploy Troops in Ukraine

In Phone Call, Obama Urges Putin to De-escalate Tensions

By

ALAN CULLISON in Sevastopol,

PAUL SONNE in Simferopol and

GREGORY L. WHITE in Moscow

The American and Russian presidents spoke on the phone for 90 minutes on Saturday after Russia’s parliament voted unanimously to deploy troops in Ukraine, defying warnings from Western leaders not to intervene.

In his conversation with Russian President Vladimir Putin , U.S. President Barack Obamaexpressed “his deep concern over Russia’s clear violation of Ukrainian sovereignty and territorial integrity.” Mr. Obama urged Russia to de-escalate tensions by withdrawing its forces back to bases in Crimea and to refrain from any interference elsewhere in Ukraine.

Saturday’s developments come as Russian troops and their local allies have already largely taken control of Crimea, a restive province of Ukraine that belonged to Russia until 1954 and remains predominantly pro-Russian.

In a statement after the call between Mr. Putin and Mr. Obama, the White House said the U.S. “condemns Russia’s military intervention into Ukrainian territory.”

Mr. Putin told Mr. Obama that Russia reserved the right to intervene in Ukraine to protect its interests and those of the Russian-speaking population there, according to a statement from the Kremlin.

Mr. Putin also spoke of “provocations, crimes by ultranationalist elements, essentially supported by the current authorities in Kiev.” It wasn’t clear what incidents Mr. Putin was referring to.

French President François Hollande also spoke with Mr. Putin Saturday and urged him to avoid any use of force in Ukraine. The French leader held a round of phone calls with Mr. Obama and German Chancellor Angela Merkel that aimed to forge a common position between the allies.

“I deplore today’s decision by Russia on the use of armed forces in Ukraine. This is an unwarranted escalation of tensions,” said European Union foreign-policy chief Catherine Ashton.

United Nations Secretary-General Ban Ki-moon said he is “gravely concerned about the deterioration of the situation” in Ukraine.

In an emergency meeting of the U.N. Security Council, Russian Ambassador Vitaly Churkin said Saturday that the regional Crimean government had formally requested Russian military assistance to restore stability to the peninsula. U.S. Ambassador Samantha Power denounced the Russian decision to intervene as “dangerous as it is destabilizing” and said it was taken without legal basis. “The Russian military must stand down,” Ms. Power said.

In Brussels, ambassadors to the main political decision-making body of the North Atlantic Treaty Organization are set to meet Sunday to discuss the crisis in Ukraine. Afterward, the ambassadors will meet with the Ukrainian ambassador to NATO in a format called the NATO-Ukraine Council.

Meanwhile, skirmishes broke out in other regions of Ukraine, raising concern about broader unrest.

The new government in Kiev called an urgent session of its security council Saturday evening and set a special parliamentary meeting for Sunday to discuss the Russian move.

Vitali Klitschko, the former boxing champion who is one of the protest movement’s most prominent leaders, called on parliament to call a “general mobilization” to respond to the threat, apparently referring to Ukraine’s military.

Heavily armed troops, many from Russia’s Black Sea Fleet, which is based in the Crimean port of Sevastopol, surrounded key facilities across the region in the past day. The newly installed pro-Russian leader of Crimea Saturday formally asked Russia to deploy its troops to help secure the region.

Mr. Putin’s request didn’t specify how many troops might be sent. It said they would be deployed “until the normalization of the social-political situation in the country.”

The request cited the “threat to the lives of Russian citizens” living in Crimea, as well as the personnel of the Black Sea Fleet.

The approval of Mr. Putin’s request doesn’t necessarily mean troops will be dispatched immediately, an official said.

“Having the right (to deploy forces) doesn’t mean immediately, momentarily exercising that. So we will hope that the situation will go according to a better scenario and won’t continue to be exacerbated as it is now,” presidential spokesman Dmitry Peskov said in a radio interview.

Mr. Peskov said in the interview that no decision had been made yet on deploying forces to Ukraine or on recall of the ambassador.

Sergei Aksyonov, who was appointed prime minister of Crimea after armed men took over the regional parliament this week, said troops from the Black Sea Fleet are guarding vital facilities in the region and helping with patrols to ensure public order. Mr. Aksyonov, who is pro-Russian, said he was taking command of the peninsula’s police and army.

In the economically important eastern Ukrainian city of Donetsk, hundreds of pro-Russian protesters massed Saturday in the main square and took over a main government administration building, and raised the Russian flag, according to local residents and news outlets. It was unclear whether the protesters were local residents. The number of protesters was also unclear; Russian and Ukrainian media had wildly different estimates of crowd strength.

The Donetsk city council issued a statement demanding a referendum over whether the mining region with strong ties to Russia should remain part of Ukraine.

By nightfall, the area around the Donetsk main square was quiet. A reporter from Ukrainian national television said that the protesters remained inside the building, drinking tea and planning new pro-Russia protests for Monday.

In Kharkiv, protests erupted Saturday between crowds of mostly young men who have been camped out at different sides of the city’s main square—Europe’s largest city square—for weeks now.

The groups, one which is pro-Kiev and the other which is pro-Moscow, are mostly local youth, some of which are supporters of the local football team, who appear to have more personal grievances with each other rather than deeply held political agendas, according to local residents who know several of the people at the demonstration.

Interfax reported that about 100 people were injured in the disorder Saturday, though that figure couldn’t immediately be confirmed.

Ukraine military bases were quickly surrounded and sealed off Saturday by Russian forces in Crimea as the Kremlin made preparations for a larger-scale landing of troops.

Russian troops were posted near the gates and around the perimeters of several bases near Sevastopol. When asked why they were there, officers replied that they were providing security to the bases, to stop any pro-Russian citizens who might try to take them.

The troops posted around the base had no markings on their uniforms. Their commander, when asked if he could reveal their nationality, said “of course not.” Others admitted they were Russian. Ukrainian officials at the base said the Russians were allowing food and provisions to be brought in.

Russia’s Foreign Ministry accused the government in Kiev of trying to destabilize the region and directing gunmen to capture Crimea’s ministry of internal affairs building overnight. It said the attack, which couldn’t be verified, was averted with “decisive action.”

Five people who live in the buildings next to the ministry building in Simferopol said everything was peaceful Friday night and they heard nothing. There were no signs of struggle at the building complex.

Vladimir Krashevsky, a top official at the Simferopol-based division of the local berkut, or riot police, said there was no attack by Kiev-allied gunmen on the building, where he gave an impromptu news conference Saturday.

“There was no attack here and there won’t be one,” he said.

The resolution authorizing the use of force in Ukraine cited the threat to Russian citizens there, but officials in Moscow repeatedly suggested that the Kremlin was coming to the defense of ethnic Russians in Ukraine, even if they hold Ukrainian citizenship.

“There is a threat today to the lives and safety of our fellow citizens, of Russian speakers, of ethnic Russians,” Valentina Matvienko, speaker of the upper house of parliament, told reporters after the vote. “We can’t remain indifferent.”

Asked about possible western counter-intervention, she said there was no ground for it. “With all due respect to the United States, where is the U.S. located and where is Russia? This is happening on Russia’s border.”

Alexander Chekalin, a senator, spoke before the vote, saying, “we are one people, speaking one language, following one faith and sharing one history.” The eastern and southern parts of Ukraine have a large number of Russian-speakers who are members of the Orthodox church.

The leader of the Crimean Tatars, the ethnic minority that accounts for 12% of Crimea and supports the new government in Kiev, sought to dispel the notion that the seizure of government buildings in Crimea had grown out of a citizen uprising.

“These buildings were seized by specially trained people acting on military orders,” said Refat Chubarov, the Tatar leader and deputy in the parliament, at a news conference Saturday.

Ukraine’s new prime minister, Arseniy Yatsenyuk, called the continuing militarization in Crimea a provocation intended to draw in Ukraine militarily. He demanded Russian forces return to their base in Sevastopol.

“The presence of Russian troops is nothing more than a violation of the agreement for the Black Sea Fleet to be in Ukraine,” Russia’s Interfax news agency quoted him as saying. “We urge the Russian government to withdraw their troops and return them to their base.”